AUSTRALIA AND RECESSION- THE WONDER DOWN UNDER ?



07/01/2019





Australia remains the sole major economy to have not experienced recession in last 30 years! The reasons for that - Institutional and government system combined with luck. The latter comes from its geographical location, resources (loads of iron, coal, uranium , gold etc) and its relationship with China due to the above factors(Australia is a net exporter).


The main reasons come down to fiscal prudence and strong institutional setup. The banking sector has avoided building up their risky positions (unlike their American and European counterparts). The economy saves money during good times so that the government can spend enough during downturns (USA is infamous for being debt- centric in either scenarios). In-fact fiscal prudence is appreciated by the Australian public in general while choosing their election representatives.


However, the past can never be a guarantee for the future. The economy has slowed its growth over last 2 quarters. Housing prices have fallen for all months throughout last year (especially Sydney & Melbourne) combined with ever increasing housing debt. But does that sound it could move towards recession? Unlikely, but a slower growth should continue.